Now that mortgage rates have risen to the 6% threshold, a global research firm says that home price growth in the U.S. The United States will not fall this year, but next year. In fact, a 5% drop would be a decline in prices, but it would not lead house prices to a death spiral. Pointon noted that Capital Economics previously stated that the United States would “avoid a total fall in house prices.” After all, most borrowers are protected by a fixed-rate mortgage, home equity levels are high, credit conditions have been tight over the past two years, and the chances of a large increase in unemployment are slim.
For those reasons, forced home sales don't seem likely and that “would keep the market relatively tight and support house prices,” Pointon wrote. However, “we've also argued that house prices will be pressured if mortgage rates rise above 6%,” Pointon said. Add the Federal Reserve's battle against inflation, which has led to aggressive increases in debt rates, and that translates into greater pressure on buyers, many of whom simply have lower prices.